Property Tax Reform
Background Also called, property tax relief. Property Tax * Lynn Swann and Property Tax Plans sounds illegal * Commonwealth Foundation's Property Tax Relief Scholarship Act from April, 2006 * Property Tax Reform-plank-Robert_Weinand from June, 2006 in a letter to PA Governor about New Jersey * Property Tax Reform-Plank-Piccola from June, 2006 * Property Tax Reform-plank-Taxpayer Alliance from June, 2006 * Property Tax Reform-plank-Logan from June, 2006 Statements * Grossly Inadequate Property Tax Reform Light from a reply to KQV editorial from Oren Spiegler in May, 2006 * Property Tax Reform-article-Oct 3, 2006 http://www.centredaily.com/mld/centredaily/news/breaking_news/15660223.htm from Centre Daily History PA's Special Session on Property Taxes in fall of 2005 was fruitless. The Senate Committee on Legislation heard presentations on two property tax reform plans. One from Logan and the other from Boscola. Senator Sean Logan's Stop Taxing Our Properties (S.T.O.P.) proposal * Eliminate all property taxes at the local, county and school district levels for primary residences. * The tax ban would take effect after passage of a constitutional amendment prohibiting residential property taxes. * Businesses and rental properties would continue to be taxed. * Property tax revenue would be replaced by a combination of state sales and personal income taxes and gaming revenue. * Logan estimated a $7 billion need to replace funds. * Sen. Logan outlined on a handout still showed a hole in the current state budget. * Logan's bill = Senate Bill 23 * Needs a 1% increase in the state personal income tax (PIT), * Needs a 2% increase in the state sales tax. * Needs additional revenue from gaming. * Needs additional revenue from the PIT increase enacted by the General Assembly in 2003. :Use of revenue from the already-enacted PIT increase means the state either would have to cut programs currently funded by that revenue or raise taxes to fill the hole. * Political subdivisions (including school districts) will be reimbursed annually by the state for the amount of revenue they would lose due to the property tax ban. * Districts initially would be reimbursed based on the amount lost for FY 2005-06; in future years, their FY 2005-06 reimbursement would be adjusted by the percentage change in the statewide average weekly wage. * The effect on education funding would be a dollar-for-dollar shift from local to state funding of education, with future inflationary increases. Legislation introduced by Senator Lisa Boscola * Mandate all school districts participate in the state's property tax relief program (The Homeowner Tax Relief Act - Act 72 of 2004), * Creates an alternative through which districts can gain approval for a tax increase without seeking approval from voters through a back-end referendum. * Act 72 requires that school boards get voter approval for school tax increases that exceed a certain index. * Boscola's legislation maintains the requirement that certain tax increases gain outside approval, however, it establishes an independent Property Tax Review Board that could sanction tax increases for school districts. :The review board would operate within the Department of Education and consist of three members appointed by the Governor (two of whom are selected from a list of candidates submitted by the PA Association of School Administrators and the PA School Boards Association), four members appointed by each legislative caucus of the General Assembly, and the Secretary of Education (as a nonvoting member). :School districts seeking to implement new taxes or tax increases beyond the index set by Act 72 could take their case to the review board. :The board would have the power to approve, deny or modify the tax under consideration. ::If the board approves the tax increase, a district may levy the tax and is not required to seek further approval through a voter referendum. ::If the increase is denied or modified by the review board, the district may take to issue before voters for a final say. * Boscola's legislation makes additional changes to Act 72 that are detailed in the bill summary included. The Senate Committee on Legislation also heard from PSEA & PSBA * Pennsylvania State Education Association (PSEA) Eric Elliott of PSEA addressed issues The distribution of basic education funding and a back-end referendum requirement for tax increases. PSEA believes that dollars should be targeted to districts "that have relatively high taxes" compared to percentage of local income. The association believes that property tax relief should be provided based on individual need, with those who pay a larger percentage of their income in taxes receiving the greatest relief, rather than all taxpayers within a school district receiving the same level of tax relief. PSEA cautions against the use of a back-end referendum to approve future school tax increases. According to Elliott, "unless school funding is adjusted in a more equitable fashion and adequacy is addressed as well, referendum will force school districts to trade educational services for tax reduction - a gamble for short-term gains with long-run consequences." Disconnect in Harrisburg with Politicians Special Session worried how replaced property tax revenue would be collected, but had no concern of how to fund school districts. They (politicians) felt property tax reform and education funding are separate issues that should not be mixed during the Special Session. Property taxes are the largest source of funding for education in the state of Pennsylvania. It is simply irrational and irresponsible to seriously consider wholesale changes to the source of funding for public education without consideration of the distribution of funding and the impact on educational services purchased with the funds. Obviously, it is easier to deal with the politically popular subject of property tax reduction. But lawmakers need to address the tougher questions as well, such as 1) how will the state funds be distributed, and 2) what will be the impact on available educational services for children in the school districts. Links Who * PA House Special Session Finance Subcommittee on Local Control Initiatives, Subcommittee Chair, Stan Saylor (717) 783-6426. Media * Phila. to fare quite well under state tax measure, Philadelphia Inquirer, June 24, 2006, Among the benefits: The expansion of property-tax and rent rebates. * The Education Policy and Leadership Center's Criteria for Evaluating Education Funding Proposals/Budgets. A guide for assessing proposals with eight key questions for everyone, http://www.eplc.org/fundingcriteria.html. * Property Tax Reform Rebates might help some and hurt others from April, 2006, at mcall.com. * 9/14/2005 plan from PA Senators in the Southeast, called Independence from Property Taxes Proposals to Limit State Spending PA Senate Bill 884 * The PA Senate has adopted legislation that would limit growth in annual state appropriations. Senate Bill 884 would restrict state appropriations through a constitutional amendment. Senate Bill 4 would place the limit in statute. In any fiscal year, growth in the state budget would be limited to the prior year's General Fund total, adjusted by the lesser of either: :# the average percentage change in personal income in PA for the preceding three calendar years, or :# the average percentage change in inflation for the preceding three calendar years plus the average percentage change in population for the past three years. :Both bills also were amended to refer to state "appropriations" rather than "state spending" that was referred to in the initial versions. The legislation contains provisions through which the General Assembly can override the spending limit to respond to a gubernatorially or presidentially declared emergency, or by a vote of two-thirds of the members of the House and the Senate upon the request of the Governor for fund that exceed the index. Annually, any surplus revenue would be distributed equally between the Budget Stabilization Reserve Fund (Rainy Day Fund) and the newly established Taxpayer Fairness Fund. Similar legislation has been passed by the House Appropriations Committee (House Bills 2067 and 2082). Senate Bill 4 and Senate Bill 884 now go to the House for consideration. PA House Bill 2067 * The House Appropriations Committee adopted House Bill 2067, which restricts state spending to the rate of inflation through a constitutional amendment. Companion legislation that would set the spending limitation in statute, House Bill 2082, was passed by the Appropriations Committee a week prior. :Both bills include exceptions through which the state could spend beyond the limit for spending mandated by federal law, spending that is the result of a court order, required state pension payments, interest owed on state debt, and funding needed to respond to an emergency or disaster declared by either the governor or President (however, disaster funding must be approved by a three-fifth vote of members of the House and Senate). :Additionally, taxpayers could approve spending beyond the rate of inflation via referendum through a majority vote. Unencumbered surplus operating funds would be refunded to taxpayers annually through a pro rate state income tax credit. Both bills await further consideration by the full House. House Bill 1586 * The PA House Finance Committee approved legislation that would gradually reduce the state personal income tax over three years. The phase-down in House Bill 1586 would reduce the rate from the current 3.07 percent to 2.8 percent in 2008. HB 1586 has been placed on the House Tabled Bills Calendar. Senate Bill 414: * Establishes the Science Technology Partnership Program, which permanently places the "Science in Motion" program into state law. Science in Motion focuses on improving science instruction by providing state grants that make scientific technology available to students, supplement science curriculum, and provide professional development to science instructors through partnerships between higher education institutions and public and non-public schools. Both the House Education and Rules Committees have passed similar legislation (House Bill 1512) that is currently on the House Tabled Bills Calendar. SB 414 has been re-referred to the Senate Appropriations Committee. Senate Bill 676 * SB 676 makes comprehensive changes to school health services. Controversy arose over a change that would lower the school nurse to student ratio to one nurse for every 750 students. Currently, districts must employ one nurse for every 1,500 students. Bill sponsor Joe Conti estimates hiring additional nurses to meet the 750:1 ratio could cost between $20 million to $24 million. Some Committee members expressed reservation at the cost, while others voiced concern that some school districts already have trouble finding qualified nurses and that increasing staffing requirements may place an additional burden on those districts. The 750:1 staffing ratio is a federal recommendation that Conti said is negotiable. Senator Jeffrey Piccola offered a narrowly-defeated amendment to maintain the 1,500:1 staffing ratio. Piccola suggested that the federal government should make funding available to hire more nurses if it supports reducing the staffing ratio. Though most Committee members voted for the legislation, some voted in the affirmative with the caveat that a closer look be taken at the staffing issue before the legislation moves forward. Among the other changes, SB 676 requires that students have physical examinations upon entry into school and in 4th, 8th and 11th grades, rather than upon school entry and in 6th and 11th grades as currently required. SB 676 awaits further consideration by the full Senate. Senate Bill 361 * Legislation allows homeschoolers to participate in extracurricular activities in their district of residence was signed. The House concurred in changes to Senate Bill 361, which establishes participation criteria that require home education students to meet criteria equivalent to students who attend the district's schools. H.B. 1617 * The House Children and Youth Committee passed an amended version of House Bill 1617. HB 1617 mandates that teachers complete a child abuse education training course at least once every five years. School entities must offer such a course at least once a year. The course must be approved by the Department of Public Welfare in consultation with the Department of Education and may be provided via CD-Rom, distance learning technology or in person. Completion of the course would count toward educators' professional development requirements. The bill awaits further consideration by the full House. H.B. 194 * The House Labor Relations Committee unanimously reported out House Bill 194, related to the Dormitory Sprinkler System Act. The bill requires that low-interest loans provided to colleges and universities for the installation of sprinklers in student housing include all costs associated with the project, including costs of modifying water supply sources and plumbing, necessary renovation work, necessary asbestos abatement, and costs associated with integrating the smoke detection and fire alarm system. HB 194 awaits further consideration by the full House. H.B. 509 * The House Veterans Affairs and Emergency Preparedness Committee approved legislation that allows State System of Higher Education campus police to carry a firearm if they have completed certain firearms training. House Bill 509 has been placed on the House Tabled Bills Calendar. State System of Higher Education * The Pennsylvania State System of Higher Education is experiencing record enrollment in 2006, for the fourth straight year. A record 107,251 students are taking classes at the 14 PASSHE universities this fall, an increase of 1,349 students over Fall 2004. PASSHE also reached a record 11,177 for minority student enrollment (10.4 percent of all students). * The State System of Higher Education Board of Governors has extended the contract of ten system university presidents through June 30, 2008. Extensions were granted to: Dr. Jessica Kozloff (Bloomsburg), Dr. Angela Armenti (California), Gruenwald (Clarion), Dillman (East Stroudsburg), Dr. Tony Atwater (Indiana), Dr. F. Javier Cevallos (Kutztown), Dr. Keith Miller (Lock Haven), Dr. Francine McNairy (Millersville), Dr. Robert Smith (Slippery Rock), and Dr. Madeline Wing Adler (West Chester). Of the four other PASSHE universities, three are currently headed by interim presidents and the president of Edinboro has announced he will retire in June 2007. http://www.legis.state.pa.us/cfdocs/legis/home/session.cfm Senate Committee on Legislation * SB 39 from 2006 Summary of Special Session Proposals Distributed at October 26, 2005 Public Hearing Senate Bill 22 (Sen. Sean Logan) * Proposes an amendment to the Constitution of Pennsylvania that would set forth a prohibition for any political subdivision that currently levies a tax on real property from levying the tax on homestead property. Senate Bill 23 (Sen. Sean Logan) * Enacts the Homestead Property Tax Elimination Act. * Prohibits political subdivisions from levying or collecting any tax on homestead property for any purpose after June 30 of the calendar year immediately following passage of an amendment to the Constitution of Pennsylvania by the electorate that would establish the prohibition against levying a tax on homestead real property. * Establishes the Homestead Property Tax Elimination Fund. * Enacts an additional 2% tax upon each separate sale at retail of tangible personal property or services as defined in Article II of the Tax Reform Code of 1971, the proceeds of which are required to be deposited into the Homestead Property Tax Elimination Fund. Maintains existing exclusions. * Enacts an additional 1% tax on each class of income as defined by Article III of the Tax Reform Code of 1971, the proceeds of which are required to be deposited into the Homestead Property Tax Elimination Fund. Maintains existing poverty exclusions. * Requires that the revenue generated from the Commonwealth's existing personal income tax rate from 2.8% to 3.07% be deposited into the Homestead Property Tax Elimination Fund. * Transfers all revenue deposited in the Property Tax Relief Fund pursuant to Act 71 of 2004 to the Homestead Property Tax Elimination Fund. * Requires that each political subdivision calculate the amount of revenue that the political subdivision will lose in the upcoming fiscal year based on eliminating property taxes for homesteads to the State Treasurer. * Permits the State Treasurer to reimburse each political subdivision for the total amount of revenue lost by the political subdivision; also requires the State Treasurer to annually adjust the political subdivision's certification of lost revenue each year by the change in the Statewide Average Weekly Wage. * Effective date is predicated on the passage of an amendment to the Constitution of Pennsylvania by the electorate that prohibits any political subdivision from levying a tax on homestead real property. * Repeals the Homeowner Tax Relief Act (Act 72 of 2004) in its entirety. Senate Bill 13 (Sen. Lisa Boscola) * Imposes the Homeowner Tax Relief Act (HTRA) on all school districts in Pennsylvania. This means: o All school districts will receive funds from Act 71 to reduce property taxes, except Philadelphia, which is still required to reduce its resident and non-resident wage tax. o All school districts, except Philadelphia, are regulated by the "back-end referendum" provisions of Act 72. * Removes the requirement that school districts must impose a 0.1% earned income and net profits tax (EIT) in order to receive state funds for property tax reduction. Any district which has already opted in to the HTRA is no longer required to collect it, although it is unclear whether a school district is still permitted to levy, assess and collect this tax. * School districts may still reduce property taxes through an increase in the EIT or a local personal income tax through referendum. However, the required "front-end referendums" are removed and the decision to conduct all future "tax shifts" is left to the discretion of the school board. * Institutes a new Property Tax Review Board. o The board is composed of three members appointed by the Governor, two of whom are required to be selected from a list of candidates submitted by the Pennsylvania School Boards Association and the Pennsylvania Association of School Administrators, and four other members who are appointed by each of the legislative caucuses in the General Assembly. The Secretary of Education also serves as a nonvoting ex officio member of the Board. o The board would be permitted to review tax increases that exceed the index or new taxes and approve or disapprove such increases. * If the tax increase or new tax is approved by the board, the school district would not be required to go to referendum and would be authorized to levy the tax. * If the tax increase or new tax is not approved by the board, the school district would be required to seek approval to increase the tax or levy the new tax from the electorate through referendum. * Eliminates the requirement that a minimum amount of homestead and farmstead property tax relief be offered in a school district. * Removes the provisions allowing a school district to ask the district's voters if they want to get out of the HTRA after 4 full years of participation (through referendum).